A Letter from WCCN's ExecutiveDirector

During the last couple of years, microfinance has been hit hard from different angles. Politicians from the whole political spectrum have organized groups of dissatisfied borrowers to actively protest against microfinance organizations in countries such as Nicaragua, Pakistan and, most recently, India. Media has been receptive to more critical claims and stories of abuses committed by a few microfinance providers in some countries. From 2005 to 2008, some people portrayed microfinance as the silver bullet to resolve poverty. Today, skepticism about its virtues grows.

In some ways, microfinance has been victim of its success, attracting the interest of traditional bankers, investors, media and, of course, politicians. They changed the traditional microfinance landscape for better and for worse. To some extent, microfinance has lost its innocence and some of its original appeal. The popularity shift doesn’t shock WCCN and other organizations that have been in the field from almost the very beginning. During the microfinance movement’s first couple of decades, few people expected it to succeed or be an effective anti-poverty tool. Microfinance showed its potential and its efficacy fighting poverty. Now that its popularity has decreased somewhat, microfinance institutions would be advised to retool and take stock of what works and what doesn't.

Microfinance organizations in Nicaragua, where the crisis was especially strong, have been doing just that. We see much room for optimism about the future of microfinance and the possibility for vindication as an anti-poverty tool. Although not the only answer, microfinance remains important.

The crisis in the microfinance sector also has allowed WCCN to seriously consider other models of financing that could accomplish similar goals. Grassroots business financing or fair trade financing recently has come to our attention, and we happily are adding this lending program to our portfolio as we continue to diversify risks and rewards. WCCN also has a very practical interest in grassroots business financing as an opportunity to support the fair trade cooperatives we have been working with for several years, as well as those we would like to support for the first time.  

This edition of Grassroots Developments focuses entirely on our new involvement with fair trade coffee financing and profiles the producer cooperatives we are working with: CECOCAFEN and La FEM in Nicaragua and COMSA and RAOS in Honduras.

We financed La FEM through Just Coffee, a Madison-based fair trade roaster cooperative. Matt Earley, one of the co-op's owners, has written a very interesting article about a new approach to fair trade lending recently tested by WCCN and Just Coffee. Matt’s perspective on the potential of this approach related to Just Coffee’s insistence that fair trade remain loyal to its roots, with the producers’ interests coming first even over their own business. WCCN is honored to help fulfill the original goals and promises that fair trade made to small-scale producers in Latin America and elsewhere. We welcome your support and hope you share our excitement about our new lending program and its promises.

Sincerely,

Carlos Arenas

WCCN Executive Director